3 Oct 2016

Dear Auntie
I am the HR Manager at a large marketing company. I have recently discovered that an employee has submitted exaggerated expenses claims for payment in respect of hotel bills and taxi fares for client trips (the amount claimed looks very high) and I also suspect that some expenses claimed do not appear to be for a client or company related matter.  I am concerned that other employees may be doing the same. What are the company’s options for in responding to this situation and is there anything we can do to prevent this happening again in the future?
Yours sincerely
Mr Fiddle
Dear Mr Fiddle
Its not just MPs who fiddle their expenses! Intentionally submitting expense claims that are not legitimate can amount to gross misconduct. It is also possibly a criminal offence, the consequences of which could be far more damaging than dismissal with immediate effect, particularly for someone in a highly regulated profession.
In this particular case:
  • Fully investigate – where you believe that an employee appears to have breached the expenses policy and submitted an excessive or fraudulent claim you should conduct a full investigation following a fair process prior to commencing the disciplinary process. This should involve collecting relevant evidence. Where there are sufficient grounds to support an allegation, a disciplinary process should be commenced and appropriate disciplinary action should be taken against the employee. You must ensure that you follow your own disciplinary procedures and are fully compliant with the ACAS Code of Practice, which came into force on 6 April 2009. There is a duty to deal with disciplinary issues promptly.  It is therefore sensible to ensure that claims for expenses are regulated and checked by you as they are submitted.
  • Impose an appropriate sanction– In ascertaining how serious the offence is you must consider the intention of the employee in making the inflated claim and the evidence available to support any allegation. Where the incorrect claim is minor and not found to be intentional it may be sufficient to give a verbal or written warning to the employee. However, where you have a reasonable belief, based on the evidence, that the breach of the expenses policy is deliberate and amounts to fraud or deceit, it will normally be appropriate for you to summarily dismiss the employee for gross misconduct.  Note that you do not have to prove “beyond reasonable doubt” (the criminal standard of proof) that the employee was in fact dishonest to dismiss, just have a reasonable belief that this was the case.
  • Consider what has happened in previous instances – you should ensure that insofar as possible you deal with all employees in a consistent manner so as to avoid allegations that you might favour certain groups of employees. This does not mean that if you have never disciplined employees for breaches of your expenses policy or dishonest claims before you cannot start doing so now, but if you are cracking down, the crackdown should apply to everyone and the sanctions imposed going forward consistent.
  • Consider whether to report the matter to the police or any other regulatory authority – Employers do not have a duty to report criminal activities by their staff and anecdotal evidence suggests most employers tend to prefer not to report for publicity reasons and so as not to become embroiled in a police investigation. Consider, however, the deterrent effect of a report. Remember though, that when you report a possible crime to the police you could have your hands tied as to how the matter is dealt with as the police will want to take over conduct of the matter. In most cases the disciplinary process should be completed before a report is made.
To prevent further dishonest expense claims:
  • If you do not have one, put a clear expenses policy in place or consider whether your existing policy needs updating –The policy, which could be included in the company handbook but referred to in the contract, should be clear and set out exactly what expenses will be reimbursed by you and those which will not.  It should specify what documentation is required to claim expenses and whether approval is required by you. It is also advisable to set out any restrictions in respect of expenses claims such as limits on the type of hotel accommodation and subsistence claims, what class of air or rail travel the employee should take. The policy should state that expenses will be reimbursed only where they are for “legitimate business use”. You may wish to require that claims are made within a certain period or the employee loses the right to be reimbursed. This is an effective way of ensuring that you avoid large numbers of claims being made by an employee at once, often long time after the expense was incurred, when it might be easier for the employee to slip in a false claim. A failure to include such a provision may also result in a former employee claiming expenses after termination of employment potentially resulting in a costly and time consuming dispute over whether or not the expenses were properly incurred.The policy should also make clear that exaggerating or abusing the expenses policy could result in disciplinary action which may include dismissal.  
  • Ensure employees are made aware of the requirements for claiming expenses – On the introduction of a new or revised expenses policy, employees should be told in writing (an email is fine) that the policy has been revised and be provided with a copy of the updated policy explaining how it will be used in practice. You should also make clear that the policy will be strictly enforced and offences for not complying with the policy should be set out. You may want to ask employees to sign the revised policy to show that the employee has understood its content.
  • Countersigning by the employee – it is sensible to ask employees to countersign the expenses claim form to prevent disputes arising as to whether the expenses were not properly incurred. By ensuring employees sign the claim form; they are agreeing that the relevant expenses were incurred for a “legitimate business use”. 
  • Update your disciplinary policy – It is recommended that you update your disciplinary policy to detail dishonesty or fraud as an act amounting to gross misconduct which is likely to result in summary dismissal.
  • Include a deduction from wages clause – In the unlikely event you do not have this clause in your contracts you should ensure this is included in the employees terms and conditions of employment. This will allow you to recover any over-claimed expenses by making a deduction from the employee’s salary.
  • Amend your standard compromise agreements – where applicable, standard compromise agreements should be reviewed and updated to include claw back provisions in relation to non-legitimate expenses. These will allow you to claim back the exaggerated expenses from an employee following termination of the employment.
  • Most importantly, ensure the policy is enforced – This is essential to deter false claims.   What good is a beautifully crafted policy if employees know that claims are not when submitted? A failure to enforce may lead to arguments by employees that the policy does not apply in practice. 
Lara Pitt is a trainee solicitor at Fox Williams LLP. She can be contacted on 020 7628 2000 or lpitt@foxwilliams.com.
 

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